Association for Public Policy Analysis & Management

Governments aim to facilitate a transition to a cleaner, more reliable and affordable energy system by shaping the ecosystem in which startups innovate. Governments often offer startups grant funding, provide preferential taxes, and forge direct technology or market-based alliances. While there is some evidence that policies for technology-push and market-pull shape innovation at the firm level, there is little understanding of the role of governments as direct partners for startup innovation through cooperative agreements, licensing, or as customers.  Examples of alliances with government organizations are the National Renewable Energy Laboratory providing assistance for technology and market readiness, and the U.S. Department of Defense acquiring certain products from startups. We address the following questions: (1) what role do start-up alliances with governments play on startup innovation when compared to other public or inter-firm alliances?; and (2) what type of government alliance, i.e., technology development, licensing, or as customer is important for start-up innovation and as a signal to capital markets?

The entrepreneurial ecosystems literature highlights the importance of understanding the ‘context’ in which start-up innovation occurs and the knowledge used by studying the effectiveness of different types of alliances with distinct types of partners. These alliances may include government partners such as public agencies or national labs, universities or research institutes, or not-for-profit actors. As alliances with governmental partners typically involve longer-term goals by the government, different types of technological expertise and less concerns of appropriability, we hypothesize that they would have stronger effects on start-up innovation and provide distinct signals to capital markets than alliances with other partner types. Moreover, we submit that the level of learning and value-added from alliances with government organizations differs by alliance type.

We develop a novel dataset of 983 US startups from 2008 to 2012 operating in the clean power and transportation sectors and their global alliances for technology, licensee and licensor, market, and project development. The base data on networking alliances of U.S. clean tech start-ups obtained from the i3 Cleantech Group is complemented with detailed data we collected on patenting, financing deals, growth (IPO or M&A), size, age, geographical location, and sector from different databases (i.e., Orbis, FactSet, Thomson One, Derwent Innovation Index). We analyze the data with negative binomial and logit regressions using robust standard errors.

We find that alliances with the most influential government partners are generally more important for startup patenting activity when compared to alliances with other partner types, at least over the short term (5 years). Technology-based alliances with influential governmental partners are associated with increased patenting, while alliances with government actors as customers are associated with lower patenting. Licensing alliances with the most influential universities and research institutes are also important for startup innovation, whereas licenses from governmental partners provide positive signals to investors and capital markets. Notably, inter-firm alliances with influential start-ups or other firms are not significant predictors of patenting activity. Our findings highlight the role of governments as direct technology partners for startup patenting and as licensors providing quality signals to capital markets.